The proposed research falls into two areas: the evaluation of health interventions in the elderly and the economics of long-term care. The first area of research develops methods for cost- effectiveness analysis of health interventions in the elderly. These methods analyze longitudinal data in order to incorporate the effects of heterogeneity. Two approaches will be developed: one generalizes the Markov model, and the other is a continuous- time hazard model. The goals of the methods are to 1) assess overall efficacy, 2) estimate the changes in efficacy that result from variation in patient characteristics, and 3) measure the effects of patient heterogeneity on cost-effectiveness estimates. The first application will be coronary artery bypass surgery in elderly patients with chronic stable angina. It will assess: 1) how survival improvements and symptom relief change with age; and 2) how results of the operation differ among clinical subgroups, such as patients with severe symptoms of congestive heart failure, or individuals who have had a previous myocardial infarction. The Coronary Artery Surgery Study Registry will provide the data for the analysis. Screening in the elderly will be a second application. The evaluation of screening will include the development of additional methodology to assess the impact of the interval between screening tests on the estimates of cost- effectiveness. The methods also demonstrate the relationship between the cost-effectiveness of a given screening interval and the presence of risk factors. The first clinical application will be screening for hypertension. The second area of research investigates the determinants of nursing home and hospital utilization of the disabled elderly. It will analyze longitudinal data from two sources -- the National Long-Term Care Demonstration (Channeling) and the National Long-Term Care Survey. It will estimate: 1) the probability of nursing home admission and the distribution of length of stay in nursing homes; 2) the impacts of informal care, financial assets, and insurance coverage on nursing home utilization; 3) the impact of institutionalization on hospital utilization. Results from the empirical work will be combined with a theoretical investigation of long-term care insurance in order to assess the impacts of alternative forms of insurance on nursing home usage, insurer liability, and financial risks faced by the disabled elderly.